Life Insurance Beneficiary Rules Australia

What is a life insurance beneficiary?

A life insurance beneficiary is the person, or persons, you nominate to receive your life insurance payout when you die.

You choose your beneficiary when you take out a policy (though you can change it further down the line) and you're able to select how much you'd like each person to receive, if you have more than one person you'd like to nominate.

• Who is eligible to become a life insurance beneficiary?

  To receive the payout, a life insurance beneficiary must be over the age of 18. If they're under this age when you pass away, it can usually be held with a nominated trustee until they reach 18. This is usually a spouse or family member.

How to change a life insurance beneficiary

Contact your life insurer

Changing life insurance beneficiary or beneficiaries is fairly straightforward for policyholders. Contact your insurer and let them know you'd like to make changes to who receives the payout.

Fill out the necessary documents

Most insurance providers will require you to fill out a change of beneficiary form. You can usually do this online; others will require you to print them out and mail them through to them.

Send to the insurer

Send the updated beneficiary information to your insurer. They should confirm with you when they've received and updated your nominated life insurance beneficiaries.

How are life insurance benefits allocated?

Life insurance benefits can be allocated among your beneficiaries however you wish. Below is an example of how you might allocate your life insurance payout if you had four beneficiaires:

How to find out if you're the beneficiary of a life insurance policy

If you think you're the beneficiary of an unclaimed life insurance policy, you can do the following:

1. Do an unclaimed life insurance search via ASIC unclaimed money.
2. Find and contact the life insurer (if your name appears in the search).
3. Begin the claims process.

Who gets the life insurance payout if the beneficiary is dead?

Another beneficiary

If a beneficiary you have nominated dies, you should contact your insurer and nominate someone else. Remember, don't assume the benefit will be automatically reallocated if you have other nominated beneficiaries – it might not. You'll need to contact the insurer and do that yourself.

The people in your Will

If you don't nominate another beneficiary, your life insurance payout will go to your estate and be distributed according to your Will, provided you have one in place. If you die without a Will, you leave what is called an "intestacy" which means your payout will be distributed by the state government based on a legal process.

Is there a difference between life insurance and super beneficiaries?

Yes, if you take out life insurance through super, you need to be aware of the following:

• The benefit goes to the trustee first. A superannuation life insurance benefit payment will be paid to the fund trustee, who will then distribute it to the beneficiaries. This can result in delays.
• A binding death nomination. This means the super fund trustee must pay your life insurance benefit to the person or persons you nominate as your beneficiary. You need to make a binding death nomination with super or the trustee will distribute the benefit to your dependents as they see fit, which may not necessarily be as you'd like.
• Tax may apply Benefit payments may be subject to tax depending on whether the beneficiaries are defined as financially tax dependent or not, whether it is paid as a lump sum or income stream and whether the super is tax-free or taxable, and whether the super fund has already paid tax on the taxable component.

How does policy ownership work?

When you take out a life insurance policy, you'll often have a few different ownership options. This determines who has total control over the policy. For example, the policy owner (or policyholder) can change the beneficiaries on the policy. They're also responsible for paying the premiums.

The most common policy ownership options include:

Compare life insurance quotes from these direct brands

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Name	Product	Maximum Cover	Maximum Entry Age	Terminal Illness Benefit	Claims Acceptance Rate	Average Claim Time	Sum Insured
NobleOak Life Insurance Finder Award		$25,000,000	74	$25,000,000	96.90%	1.1 months	$24,483 million	Our verdict: Finder Life Insurance Award winner for the last 5 years in a row. Good value for money, simple application process and a high claims acceptance rate. ⭐ Current offer: Get one month free for a limited time - apply by 21 December 2023. Offer T&Cs on insurer website apply.	Get Quote View details	Compare	loading Fetching your data...
TAL Accelerated Protection Life Insurance Finder AwardBonus		No set limit	73	Not stated	Data not available	1 months	$249,285 million	Our verdict: One of Australia's leading life insurers. Automatically includes child critical illness cover. Plus, it comes with a level premium option (e.g. costs remain similar as you get older). ⭐ Current offer: Get up to 15% off your TAL Life, Trauma or TPD insurance policy for life - if you have a Body Mass Index (BMI) between 19 and 28 at the time of your application. Offer T&Cs on insurer website apply.	Get Quote View details	Compare	loading Fetching your data...
Medibank Life Insurance		$2,500,000	70	$2,500,000	Data not available	Data not available	Data not available	Our verdict: Medibank offers a higher payout limit ($2.5 million) than 15 other providers. Get a 10% discount if you're already a Medibank Health Insurance member.	Get Quote View details	Compare	loading Fetching your data...
ahm Life Insurance		$1,500,000	55	$1,500,000	Data not available	Data not available	Data not available	Our verdict: ahm offers a simple application process. You can be approved online or over the phone. There are no medical or blood tests required.	Get Quote View details	Compare	loading Fetching your data...
RAC Life Insurance Bonus		$25,000,000	74	$25,000,000	96.90%	1.1 months	$24,483 million	Our verdict: RAC’s maximum death cover limit of $25 million is one of the highest limits you’ll find, including $5 million in TPD insurance. You can get an online quote, but you’ll need to call RAC to get trauma cover. Benefit from added peace of mind with fully underwritten insurance.	Get Quote View details	Compare	loading Fetching your data...
Real Family Life Cover Bonus		$1,000,000	64	$1,000,000	88.90%	2.4 months	$53,238 million	Our verdict: The application is simple; it can be done with 1 phone call and there are no medical exams. But households with larger debts may need more than a $1 million payout. ⭐ Current offer: Get back 10% of the premiums you’ve paid after 1 year.	Get Quote View details	Compare	loading Fetching your data...

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Life insurance beneficiary rules FAQs

• Should I still have an estate plan or Will?

  Yes, while you should be able to nominate your beneficiaries when you take out a policy, having an up-to-date Will in place is a good backup. A Will not only directs the proceeds of your life insurance to the right people should you forget to change or nominate a beneficiary but it also ensures the correct distribution of the other assets that make up your estate.

  A comprehensive estate plan would also cover circumstances such as power of attorney, where you nominate another person to make decisions on your behalf, should you be unable to do so.

• When might I need to update my life insurance beneficiaries?

  There are lots of stages in your life where you might need to update who will receive your life insurance beneficiary. These could include:

  • Death of a beneficiary. While it's never a pleasant thought, unexpected deaths can happen. The loss of a child, other family member or close friend could mean an adjustment to your nominated beneficiary.
  • Birth of a child. The arrival of a new child to your family could mean an adjustment to your beneficiary nomination is needed. Similarly, it could mean that you need to reconsider the sum insured in your policy.
  • Divorce or separation. If your spouse was your beneficiary, you may want to change your beneficiary if you get divorced or separate.

• How do I make sure the money gets to the right person?

  When you take out a life insurance policy, you'll nominate who you want to receive the life insurance benefit. That may well change over time, particularly if you take out cover when you're young, so it's important to review your policy regularly. Making changes is usually a straightforward process, unless you hold life insurance cover through super – in which case, you'll need to make a binding death nomination.

• What details will I need to provide when nominating a beneficiary?

  You'll need to have the following details of the person or persons who are going to be your beneficiary:

  • Full name
  • Residential address
  • Their relationship to you
  • Date of birth
  • Sex
  • The percentage split (if the benefit will be divided)